Securities
Beginning balance, October 1, 2008 $ 61,776
Change in unrealized loss (1,834 )
Purchases, issuances and proceeds (3,342 )
Transfers in and/or out of Level 3 -
Ending balance, March 31, 2009 $ 56,600
Deposits

The fair value of deposits with no stated maturity, such as demand deposits, savings accounts, and money market accounts, is the amount payable on demand at the reporting date. The fair value of certificate accounts is calculated by using discounted cash flows applying interest rates currently being offered on similar certificates.

Borrowed Funds

The fair value of long-term borrowed funds is estimated using discounted cash flows based on the Bank’s current incremental borrowing rates for similar borrowing arrangements. The carrying value of short-term borrowing approximates its fair value.

Off-Balance-Sheet Instruments

The fair value of off-balance sheet commitments would be estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the current interest rates, and the present creditworthiness of the customers. Since this amount is immaterial, no amounts for fair value are presented.

The carrying amount and estimated fair value of financial instruments at September 30, 2008 and June 30, 2009 were as follows (000’s):

	June 30, 2009				September 30, 2008
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Cash and cash equivalents	$	23,385	$	23,385	$	23,666	$	23,666
Interest bearing deposits		4,312		4,312		371		371
Securities available for sale		61,384		61,384		61,776		61,776
Loans receivable		424,610		427,568		368,518		367,153
FHLB Stock		6,040		6,040		5,787		5,787
Accrued interest receivable		2,077		2,077		1,726		1,726

Financial Liabilities:
Deposits		365,897		367,704		297,243		301,803
Borrowed funds		120,805		125,334		110,245		111,339
Accrued interest payable		353		353		412		412

Limitations

Fair value estimates are made at a specific time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on- and off balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include premises and equipment, other assets, and other liabilities.

In addition, the tax ramifications related to the realization of the unrealized gains or losses can have a significant effect on fair value estimates and have not been considered in the estimates.

NOTE 6 – FEDERAL HOME LOAN BANK STOCK

The Company is required to be a member of and maintain a certain amount of capital stock of the FHLB of Chicago ("FHLB") to obtain an advance from the FHLB. As of June 30, 2009 the carrying amount of the Company's investment in FHLB stock was $6.0 million. There is no ready market for the FHLB stock nor is there any quoted market values for the FHLB stock because shares can only be purchased or sold between members of the FHLB at the stock's $100 par value. As a result, the Company accounts for this investment as a long-term asset and carries it at cost. The Company reviews this investment for impairment in accordance with Statement of Position (SOP) 01-6, Accounting by Certain Entities (Including Entities With Trade Receivables) That Lend to or Finance the Activities of Others, whenever it measures the fair value of the investment or, at a minimum, whenever an event or change in circumstances has occurred that may have significant adverse effect on the fair value of the investment.

On October 10, 2007, the FHLB entered into a consensual cease and desist order with its regulator, the Federal Housing Finance Board ("Finance Board"). Under this order, the FHLB must maintain certain minimum capital ratios; therefore, restricting capital stock repurchases and redemptions, including redemptions upon membership withdrawal, without approval of the Director of the Office of Supervision of the Finance Board. As a result of this order, coupled with net losses over several periods, and the restrictions placed on stock redemptions, the Company considers the following in order to determine whether the FHLB stock should be classified as other-than-temporarily impaired:

●		Significance and length of the decline in net assets compared to the capital stock;

●		Commitments by the FHLB to make payments required by law or regulation;

●		Impact of legislative and regulatory changes; and

●		Liquidity position of the FHLB.

After considering these factors and the Company's intention and ability to hold the FHLB stock for the time necessary to recover the initial investment, the Company determined that the FHLB stock was not impaired as of June 30, 2009.

NOTE 67 – NEW ACCOUNTING PRONOUNCEMENTS

In February 2007, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 159, the Fair Value Option for Financial Assets and Financial Liabilities-Including an Amendment of FASB Statement No.115. This statement allows companies to elect to measure certain financial assets and liabilities at fair value, and with changes in fair value recognized in the income statement each period. This pronouncement is effective for financial statements issued for fiscal years beginning after January 1, ~~2008 and at this time we~~2008. We did not elect to adopt the fair value option for any financial assets or liabilities. We are continuing to study the impact of this statement on our financial results.

In ~~April~~June 2009, the FASB issued ~~FSB FAS 107-1 and APB 28-1,~~ ~~Interim Disclosures about Fair Value~~SFAS 166, Accounting for Transfers of Financial ~~Instruments. FSP~~Assets – an amendment of FAS ~~107-1 and APB 28-1~~140 (“SFAS 166”) which, among other things, amends ~~FASB Statement No. 107,~~ ~~Disclosures about Fair Value~~the criteria for whether a transfer qualifies for sale accounting when only a portion of ~~Financial Instruments,~~ ~~to require disclosures about fair value~~a financial asset is transferred. This guidance impacts many types of financial ~~instruments for interim reporting periods~~assets (e.g. loan participations, sales of ~~publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28,~~ ~~Interim Financial Reporting,~~ ~~to require those disclosures in summarized financial information at interim reporting periods. This FSP shall be~~mortgages or installment loans) occurring after the effective ~~for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March~~date of November 15, 2009. The ~~Company has elected to not early adopt this FSP and believes the~~ adoption of ~~this statement will~~SFAS 166 is not expected to have a ~~significant~~material effect on ~~its~~our consolidated financial statements.

In June 2009, FASB also issued SFAS 167, Amendments to FASB Interpretation No. 46 (“SFAS 167”) which changes the consolidation rules as they apply to variable interest entities. This guidance is effective January 1, 2010 and is intended to address concerns about companies’ ability to structure transactions to avoid consolidation. The adoption of SFAS 167 is not expected to have a material effect on our consolidated financial statements.

On July 1, 2009, the FASB accounting standards codification became the single source of authoritative nongovernmental U.S. GAAP. The Codification, which will be effective in the third quarter of 2009, is not intended to change GAAP but will change references in financial statements and accounting policies.

In April 2009, ~~the~~ FASB issued three FASB Staff Positions (“FSPs”): FSP FAS 115-2, ~~and FAS 124-2,~~ ~~Recognition~~“Recognition and Presentation of Other-Than-Temporary ~~Impairments.~~ This FSP amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. This FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. This FSP shall be effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company has elected to not early adopt this FSP and believes the adoption of this statement will not have a significant effect on its financial statements.

~~In April 2009, the FASB issued~~Impairments;” FSP FAS 157-4, ~~Determining~~“Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not ~~Orderly This~~Orderly;” and FSP ~~provides additional guidance for estimating fair value in accordance with FASB Statement No. 157,~~ FAS 107-1, “Interim Disclosures about Fair Value ~~Measurements, when the volume and level~~ of ~~activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. This FSP shall be~~Financial Instruments.” All of these FSPs are effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ~~ending~~ended after March 15, 2009. The Company adopted all three of these FSPs during the third quarter of 2009. As a result of implementing the new rules, the amount of OTTI recognized in income in the June 2009 quarter was $7.2 million. Had the rule not been implemented, the full amount of fair value decline and the full amount of the unrealized fair value decline in the value of the securities with OTTI of $12.5 million would have been recognized in income in the June 2009 quarter. Most notably, the Company has ~~elected~~expanded its quarterly disclosures related to ~~not early adopt this~~the fair value of financial instruments in Note 5, “Fair Value Accounting,” as required by FSP ~~and believes the adoption of this statement will not have a significant effect on its financial statements.~~

11FAS 107-1.

As of June 30, 2009, the Company adopted FASB SFAS No. 165, “Subsequent Events” (“SFAS 165”). SFAS 165 established general standards and requirements for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date; that is, whether that date represents the date the financial statements were issued or were available to be issued.

~~ITEM 2.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL~~
	NOTE 8 – SUBSEQUENT EVENTS The Company has evaluated events through August 19, 2009, the date on which the financial statements were available to be issued. ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995, and are including this statement for purposes of these safe harbor provisions. “Forward-looking statements”, which are based on certain assumptions and describe future plans, strategies and expectations of Citizens Community Bancorp may be identified by the use of words such as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” and “potential”. or the negative of those terms or other words of similar meaning. Such forward-looking statements are inherently subject to known and unknown risks and uncertainties. The Company's actual results and future developments could differ materially from the results or developments expressed in, or implied by, these forward-looking statements. Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results of operation and business that are subject to various factors which could cause actual results to differ materially from these estimates and most other statements that are not historical in nature. These factors include, but are not limited to, general and local economic conditions, changes in interest rates, deposit flows, demand for mortgage, consumer and other loans, real estate values, competition, changes in accounting principles, policies, or guidelines, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Further information concerning Citizens Community Bancorp, Inc. and its business, including additional factors that could materially affect our financial results, is included in our filings with the Securities and Exchange ~~Commission.~~Commission, including in Part I, Item 1A, “Risk Factors,” in the Company's Form 10-K for the year ended September 30, 2008. The Company undertakes no obligation to make any revisions to the forward-looking statements contained in this report or to update them to reflect events or circumstances occurring after the date of this report.

GENERAL

Citizens Community Bancorp (“CCB”) was capitalized as a result of an initial public offering related to a mutual holding company reorganization effective March 29, 2004, as explained in Note 1 to the unaudited consolidated financial ~~statements.~~statements included elsewhere in this report. CCB was the mid-tier holding company for Citizens Community Federal. CCB was chartered under federal law and owned 100% of the stock of Citizens Community Federal (the “Bank”). CCB directed Citizens Community Federal’s business activities.

On October 31, 2006, Citizens Community MHC (the “MHC”) completed its reorganization into stock form and Citizens Community Bancorp, Inc. (the "Company") succeeded to the business of CCB, the MHC’s former stock holding company subsidiary. The outstanding shares of common stock of the former mid-tier stock holding company (other than shares held by the MHC which were canceled) were converted into 1,826,380 shares of common stock of the Company. As part of the second-step mutual to stock conversion transaction, the Company sold a total of 5,290,000 shares to eligible depositors of the Bank in a subscription offering at $10.00 per share, including 341,501 shares sold to the ~~ESOP~~Company's Employee Stock Ownership Plan (ESOP) utilizing funds borrowed from the Company.

Citizens Community Bancorp, Inc. was incorporated under the laws of the State of Maryland to hold all of the stock of Citizens Community Federal. Citizens Community Bancorp, Inc. is a unitary savings and loan holding company and is subject to regulation by the Office of Thrift Supervision (OTS). Citizens Community Bancorp, Inc. has no significant assets other than all of the outstanding shares of common stock of Citizens Community Federal, the net proceeds it kept from the reorganization and its loan to the ESOP.

The following discussion focuses on the consolidated financial condition of the Company and the Bank as of ~~March 31,~~June 30, 2009, and the consolidated results of operations for the three months and ~~six~~nine months ended ~~March 31,~~June 30, 2009, compared to the same periods in 2008. This discussion should be read in conjunction with the interim condensed consolidated financial statements and notes thereto included with this report.

Historically, Citizens Community Federal was a federal credit union. Citizens Community Federal accepted deposits and made loans to members, who lived, worked or worshiped in the Wisconsin counties of Chippewa and Eau Claire, and parts of the Wisconsin counties of Pepin, Buffalo and Trempealeau. Members included businesses and other entities located in these counties, and members and employees of the Hocak Nation.

In December 2001, Citizens Community Federal converted to a federal mutual savings bank in order to better serve its customers and the local community through the broader lending ability of a federal savings bank, and to expand its customer base beyond the limited field of membership permitted for credit unions. As a federal savings bank, the Bank has expanded authority in originating residential mortgage and consumer loans, and it has the ability to make commercial loans, although the Bank does not currently have any immediate plans to commence making commercial loans. In 2004, Citizens Community Federal reorganized into the mutual holding company form of organization.

We have utilized our expanded lending authority to significantly increase our ability to market one-to four-family residential lending. Most of these loans are originated through our internal marketing efforts, and our existing and walk-in customers. We typically do not rely on real estate brokers or builders to help us generate loan originations.

In order to differentiate ourselves from our competitors, we have stressed the use of personalized, branch-oriented customer service. With operations structured around a branch system staffed with knowledgeable and well-equipped employees, our ongoing commitment to training at all levels of our staff remains a key to the ~~Company’s~~Bank’s success. As such, our focus is on building and growing banking relationships, in addition to opening new deposit accounts and loans.

On July 1, 2005, Community Plus Savings Bank, located in Rochester Hills, Mich., was acquired through a merger with and into Citizens Community Federal. At June 30, 2005, Community Plus Savings Bank had total assets of $46.0 million and deposits and other liabilities of $41.8 million, prior to purchase accounting adjustments.

On October 31, 2006, the MHC completed its reorganization into stock form and the Company succeeded to the business of Citizens Community Bancorp, the MHC's former stock holding company subsidiary. Each outstanding share of common stock of the former mid-tier stock holding company (other than shares held by the MHC which were canceled) was converted into 1.91067 shares of common stock of the Company. As part of the second-step mutual to stock conversion transaction, the Company sold a total of 5,290,000 shares to eligible members of the MHC in a subscription offering at $10.00 per share, including 341,501 shares purchased by the Company’s ~~employee stock ownership plan~~ESOP with funds borrowed from the Company.

The Bank is a federally chartered stock savings institution with 2226 full-service offices – nine stand-alone locations and 1317 in-store Walmart ~~supercenter~~Supercenter branches. Citizens acquired a branch in Chippewa Falls, Wisconsin, in November 2002, ~~as well as~~ a branch in Mankato, Minnesota in November of 2003, opened a new branch office in Oakdale, Minnesota on October 1, 2004, and, as noted above, acquired Community Plus Savings Bank's Lake Orion and Rochester Hills, Michigan, branches on July 1, 2005.

In 2008, the Bank opened eight branches in ~~Walmart supercenters in~~ Wisconsin and Minnesota. ~~New~~The new branches ~~include:~~are located in Brooklyn Park, Faribault, Hutchinson, Red Wing and Winona, Minnesota. The Bank also moved its existing branches in Black River Falls, Wisconsin Dells and Rice Lake, Wisconsin to ~~the~~ new ~~Walmart supercenter~~ locations in those respective communities. In August 2008, the Bank acquired three American National Bank (ANB) of Beaver Dam, Wisconsin, branches located in ~~Walmart supercenters in~~ Appleton, Fond du Lac and Oshkosh, Wisconsin.

In addition, in October 2008, the Bank signed an agreement ~~with Walmart~~ to open six more branches during 2009. ~~To date,~~Through June 30, 2009, the Company ~~has~~ opened ~~two out of these six new locations~~branches in Menomonie, Neenah, Wisconsin Rapids and ~~Neenah,~~Shawano, Wisconsin. ~~Citizens intends to open~~After the end of the June 30th quarter, the Company opened its ~~four remaining~~final two of the previously announced new branches in Oak Park Heights, ~~Minn.,~~Minnesota and Plover, ~~Shawano and Wisconsin Rapids, Wisconsin, by the end of calendar 2009.~~

Wisconsin.

Citizens Community Bancorp, Inc. is incorporated under the laws of the State of Maryland to hold all of the stock of Citizens Community Federal. Citizens Community Bancorp, Inc. is a unitary savings and loan holding company and is subject to regulation by the Office of Thrift Supervision (OTS). Citizens Community Bancorp, Inc. has no significant assets other than all of the outstanding shares of common stock of Citizens Community Federal, the net proceeds of the reorganization it kept and its loan to the Citizens Community Bancorp, Inc. employee stock ownership plan.

At ~~March 31,~~June 30, 2009, the Company had total assets of ~~$507.5~~$546.7 million, total deposits of ~~$342.2~~$365.9 million and stockholders' equity of ~~$62.2~~$55.8 million. The Company and the Bank are examined and regulated by the OTS,their primary federal regulator. The Bank is also regulated by the FDIC. The Bank is required to have certain reserves set by the Federal Reserve Board and is a member of the Federal Home Loan Bank of Chicago, which is one of the 12 regional banks in the Federal Home Loan Bank System.

CRITICAL ACCOUNTING POLICIES

~~Allowance for Loan Losses~~.

Citizens Community Federal maintains an allowance for loan losses to absorb probable incurred losses in the loan portfolio. The allowance is based on ongoing, quarterly assessments of the estimated probable incurred losses in the loan portfolio. In evaluating the level of the allowance for loan losses, management considers the types of loans and the amount of loans in the loan portfolio, historical loss experience, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral and prevailing economic conditions.

At ~~March 31,~~June 30, 2009, the allowance for loan losses was ~~$1.5~~$1.7 million, or ~~0.39%~~0.40%, of the total loan portfolio. Assessing the allowance for loan losses is inherently subjective as it requires making material estimates, including the amount and timing of future cash flows expected to be received on impaired loans, ~~that~~any of which estimates may be susceptible to significant change. In the opinion of management, the allowance, when taken as a whole, reflects estimated probable loan losses in the Company’s loan portfolio. Given the historical performance of its lending portfolio, the Company’s allowance for loan losses is ~~well~~ below comparable peer levels. ~~Citizens~~The Bank's management believes it is able to maintain a lower loan loss allowance, in part, because it does not participate in any higher risk sub-prime lending or construction lending.

SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, requires that available-for-sale securities be carried at fair value. We require a third-party vendor to assist in the determination of fair values. Adjustments to the available-for-sale securities impact our financial condition by increasing or decreasing assets and stockholders’ equity, and possibly net income.

~~Other Investments~~

~~The Company reviews investments accounted for under the cost method for impairment whenever it measures fair value of the investments or, at a minimum, whenever an event or change~~ Declines in ~~circumstances has occurred that may have significant adverse effect on~~ the fair value of available-for-sale securities below their cost that are deemed to be other than temporarily impaired are reflected in earnings as realized losses. In estimating other-than-temporary losses, we consider many factors which include: (1) the ~~investments.~~length of time and the extent to which fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of our financial position to retain the investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. If a security has been impaired, and the impairment has been deemed other-than-temporary and material, a write-down will occur in that quarter. If a loss is deemed to be other-than-temporary, it is recognized as a realized loss in the financial statements of income with the security assigned a new cost basis. The Company will have these securities evaluated by an independent third-party quarterly.

PERIOD HIGHLIGHTS

When the financial crisis hit the U.S. economy in the fall of 2008, the Company's board of directors embarked upon an initiative that attempted to prepare the Bank to withstand whatever challenges that might befall the Bank as a result of the crisis. At that time, the future of the whole financial industry was in doubt, and the banking industry in particular was in disarray. It was difficult to anticipate where the most severe challenges would come from but since the Bank was still committed to its aggressive growth plan by opening six new branches in the first half of 2009, in addition to the eleven that were opened in 2008, the Company's board adopted a four-pronged approach in dealing with the crisis:

●		An initiative with management to radically increase operational efficiency, reduce expenditures and enhance revenues from operations;
●		An analysis of all vendor relationships and contracts with a view to eliminating all but the essential ones and either changing vendors or renegotiating terms with the remaining vendors;
●		An evaluation of personnel policies, travel and entertainment policies, salary and benefit plans, and management performance and succession; and
●		An initiative to develop new and innovative revenue streams in addition to the revenues generated by the Bank's historical banking operations.

Concerning operations, the Company's board developed twelve new efficiency ratios that form the base line from which new efficiency goals for the Company are derived. These ratios are also designed to assist the board and management by providing early indications of potential developing problems. In addition, Bank management commissioned a study that identified viable cost-cutting and revenue enhancement opportunities that, after implementation, are expected to result in annual cost savings of more than $300,000.

The Company has already begun its analysis and renegotiation of vendor relationships, which, starting with the quarterly period ending on September 30, 2009, are expected to result in annual savings of more than $250,000, and this vendor cost-cutting project is not yet complete.

To further the Company's cost-cutting initiatives, the Bank has frozen salaries at their current levels, suspended contributions to the ESOP and Supplemental Executive Retirement Plan (SERP), revised the travel and entertainment expense reimbursement policy, all with anticipated annual savings of more than $500,000. The Company is currently evaluating all other employee benefit programs with the intent of reconfiguring them to more appropriately reflect the current economic environment.

In addition, our Chief Executive Officer, James Cooley, has been working on developing innovative new product lines that we intend to offer to selected financial institutions across the country. These initiatives, if implemented, are expected to begin generating profit to the Company's bottom line by the end of the second quarter of fiscal 2010.

The Bank's aggressive growth plan began in 2007 and included opening eleven branches in 2008 and six branches in the first half of 2009. Company management expected that the costs associated with this growth strategy would depress earnings at least through calendar year 2010, and this indeed was the case during the quarter ended June 30, 2009. In addition to the incurrence of those branch opening costs, during the quarter ended June 30, 2009, the Company had OTTI of $7.2 million. The FDIC insurance premium increased by $82,000 and we were allocated a special assessment of $252,000 totaling additional increases in costs of $286,000 during the most recently completed fiscal quarter. Nonetheless, earnings from operations were up for the quarter ended June 30, 2009, excluding the items above, over the prior quarter ended March 31, 2009 and over same period in the prior fiscal year.

In anticipation that the growth of the Bank's consumer lending would surpass its growth in real estate lending as a result of the opening of the new branches, in 2007 the Bank purchased a portfolio of triple A rated mortgage backed securities (MBS) with attractive yields. These MBS have contributed in prior quarterly periods substantially to the Company's earnings picture, offsetting much of the downward pressure on earnings from the cost of the new branches. The subsequent collapse in the housing market and the development of the liquidity crisis, however, has caused the secondary market for MBS to all but disappear, which, among other reasons, has caused the Bank to completely revise the way MBS portfolios are valued on the holders' balance sheets. The Company completed an independant valuation on the majority of the MBS for the current period. Based upon the valuation completed the Company had OTTI of $4.3 million net of tax which resulted in loss of $4.1 million for the current quarter. In addition, our MBS portfolio has affected the evaluation of our risk-weighted capital, causing us to contribute approximately $7.6 million from the Company down to the Bank as an additional contribution to the capital of the Bank in order for the Bank to maintain its "well capitalized" rating.

FINANCIAL CONDITION

Total Assets. Total Company assets as of ~~March 31,~~June 30, 2009, were ~~$507.5~~$546.7 million, compared with $480.0 million as of September 30, 2008, and ~~$487.6~~$507.5 million as of ~~December~~March 31, ~~2008,~~2009, a fiscal year-to-date increase of ~~$27.5~~$66.7 million, or ~~5.7~~13.9 percent. The gain was primarily due to a ~~$30.8~~$56.6 million increase in loans receivable—of which, ~~$24.1~~$43.8 million were generated through the Company’s new ~~Walmart in-store~~ branches. ~~This was partially offset by decreases in cash and cash equivalents to help fund new loan demand.~~

Cash and Cash Equivalents. Cash and cash equivalents ~~decreased~~remained basically unchanged from $23.7 million on September 30, 2008, to ~~$18.7~~$23.4 million on ~~March 31, 2009. The decrease was due to use of these funds by~~June 30, 2009, as the Company ~~to fund new loan demand.~~maintained its desired level of liquidity.

Securities Available for Sale. ~~Securities available for sale decreased from $61.8~~The Company manages the securities portfolio in an effort to enhance income, improve liquidity, and meet the qualified Thrift Lender test.

The total investment portfolio was $61.4 million ~~on September~~at June 30, ~~2008, to~~2009 compared with $56.6 million onat March 31, 2009 and $61.8 million at September 30, 2008. The investment portfolio continues to pay-down at a ~~decrease~~consistent rate of ~~$5.2~~approximately $7.8 million for the quarter ended June 30, 2009. The Company’s non-agency MBS were originally purchased throughout 2007 and early 2008 and are generally secured by prime residential mortgage loans. These securities were all rated “triple-A” by various credit rating agencies at the time of their original purchase. Since purchased, $25.4 million of the June 30, 2009 book value of the non-agency MBS portfolio were downgraded from investment grade to below investment grade. The market for these securities has depressed in response to stress and illiquidity in the financial markets and a general deterioration in economic conditions. Although mindful of these developments, management has determined that it may be likely the Company will not collect all amounts due according to the contractual terms of these securities.

At the end of the June 2009 quarter, the OTS required all thrift institutions to adopt the direct credit substitute method for determining the risk based capital required for securities rated BB or ~~8.4 percent.~~below. This method requires the institution to risk weight all the underlying loans in the securitization that the security supports based on the position of the institution’s security in the securitization. This treatment can result in below BB rated subordinate tranches receiving up to a 1250% risk weight. The ~~decrease was~~Company adopted the OTS capital guidance in the June 2009 quarter. As previously stated, a ~~result~~group of ~~a $1.7~~$30.6 million ~~increase in unrealized loss along with $3.5~~book value of securities were deemed to be OTTI and written down $7.2 million in the quarter. The Company maintains that of the remaining book value of $50.6 million of securities with a fair value loss of $9.6 million at June 30, 2009 are expected to return scheduled principal and ~~interest payments from~~interest. However, collection is still subject to numerous factors outside of the ~~non-agency mortgage-backed~~Company’s control and a future determination of OTTI could result in more losses being recorded through earnings in future periods.

The amortized cost and market values of available-for-sale securities are as follows:

June 30, 2009	Amortized Cost		Fair Value

Agency MBS	$	20,337	$	20,347
Non-agency mortgage securities		50,645		41,037
	$	70,982	$	61,384

September 30, 2008	Amortized Cost		Fair Value

Agency MBS	$	541	$	543
Non-agency mortgage securities		65,242		61,233
	$	65,783	$	61,776

Over the past several quarters, the rating agencies have revised downward their original ratings on thousands of mortgage securities which were issued during the 2001-2007 time period. As of June 30, 2009, the Company held $20.5 million in fair value of investments ~~(“MBS”). While~~that were originally rated “Investment Grade” but have been downgraded to “Below Investment Grade” rated by at least one of three recognized rating agencies. However, 50% of the fair value or 50% based on amortized cost of the portfolio remained “Investment Grade” by all nationally recognized rating agencies rating the securities.

As of June 30, 2009, the composition of the Company’s available-for-sale portfolios by credit rating was as follows:

June 30, 2009	Amortized Cost		Fair Value

Agency	$	20,337	$	20,347
AAA		11,558		9,991
AA		3,611		2,781
A		4,769		3,958
BBB		5,281		3,806
Below investment grade		25,426		20,501
	$	70,982	$	61,384

September 30, 2008		Amortized Cost		Fair Value
Agency	$	541	$	543
AAA		54,676		52,473
AA		4,529		4,276
A		2,246		1,808
BB		3,791		2,676
	$	65,783	$	61,776

The Company monitors its investments on an on-going basis and, as of June 20, 2009 (to be performed quarterly thereafter), has an independent valuation completed for all private labeled mortgage backed securities. This analysis is utilized to ascertain whether any decline in market value is other-than-temporary. In determining whether an impairment is other than temporary, management consider the length of time and the extent to which the market value has been below cost, recent events specific to the issuer including investment downgrades by rating agencies, and economic conditions within its industry, whether it is more likely than not that we will be required to sell the security before there would be a recovery in value, and credit performance of the ~~mortgage-related securities has been subject to rating agency downgrades, the unrealized~~underlying collateral including delinquency rates, cumulative losses relate principally to the continued dislocation of the securities market. All securities continue to pay as scheduled despite current market conditions. When analyzing an issuer’s financial condition, management considers whether the securities are issued by a government body or agency, whether a rating agency has downgraded the securities, and industry analysts’ reports. We continue to monitor the credit quality closely, and to date, and prepayment speed.

For mortgage-backed securities ~~continue to perform as scheduled~~that are considered other-than-temporarily impaired and ~~are dollar good. Since management~~that the Company has the ability and intent to hold ~~securities~~ until the ~~foreseeable~~recovery of our amortized cost bases, the recognized OTTI in accordance with FSP FAS 115-2 and FAS 124-2. Under this FSP, the Company separates the amount of the OTTI into the amount that is credit related and the amount due to all other factors. The credit loss component is recognized in earnings and is the difference between the security’s amortized cost basis and the present value of expected future ~~for~~cash flows. The amount due to other factors is recognized in other comprehensive income.

In the quarter ended June 30, 2009, the results of this analysis indicated that a portion of the decline in market value of nine securities, ~~available for sale, no declines are deemed~~with a book value of $30.6 million and a fair value of $18.1 million, was other-than-temporary, and, as a result, the affected securities were written down by $7.2 million on a pre-tax basis to ~~be other-than-temporary.~~the current quarters earnings and $5.3 million is recognized as changes in the fair value and recorded through accumulated other comprehensive loss (net of deferred income taxes), which is a component of shareholders’ equity.

Loans Receivable. Loans increased by ~~$30.8~~$56.6 million, or ~~8.3~~15.3 percent, to ~~$400.5~~$426.3 million as of ~~March 31,~~June 30, 2009, from $369.7 million as of September 30, 2008, and ~~$383.6~~$400.5 million as of ~~December~~March 31, ~~2008.~~2009. At ~~March 31,~~June 30, 2009, the loan portfolio was comprised of ~~$220.7~~$231.5 million of loans secured by real estate, or ~~55.1~~54.3 percent of total loans, and ~~$179.7~~$195.0 million of consumer loans, or ~~44.9~~45.7 percent of total loans. Of the ~~$30.8~~$56.6 million increase in loans receivable, ~~$24.1~~$43.8 million was originated through the Company’s ~~Walmart in-store~~new branches.

At September 30, 2008, the loan portfolio mix included real estate loans of $204.9 million, or 55.4 percent of total loans, and consumer loans of $164.9 million, or 44.6 percent of total loans.

Allowance for Loan Losses. The following table is an analysis of the activity in the allowance for loan losses for the three- and ~~six-month~~nine-month periods ended ~~March 31,~~June 30, 2009, and ~~March 31,~~June 30, 2008.

	Three months ended						Nine months ended
	June 30, 2009			June 30, 2008			June 30, 2009			June 30, 2008

Balance at Beginning	$	1,544		$	1,068		$	1,192		$	926
Provisions Charged to Operating Expense		324			182			964			543
Loans Charged Off		(178	)		(134	)		(483	)		(367	)
Recoveries on Loans		14			12			30			26
Balance at End	$	1,703		$	1,129		$	1,703		$	1,129

Three months ended

Six months ended

March 31, 2009

March 31, 2008

March 31, 2009

March 31, 2008

Balance at Beginning $ 1,327 $ 983 $ 1,192 $ 926
Provisions Charged
to Operating Expense
374 196 641 361
Loans Charged Off (168 ) (118 ) (305 ) (233 )
Recoveries on Loans 12 7 17 14
Balance at End $ 1,544 $ 1,068 $ 1,544 $ 1,068

Office Properties and Equipment. Total investment in office properties and equipment was ~~$6.7~~$7.6 million at ~~March 31,~~June 30, 2009, and $5.9 million on September 30, 2008. The increase was primarily the result of the new ~~Walmart in-store~~ branches opened or in the process of ~~opening.~~opening as of June 30, 2009.

Deposits. Deposits grew to ~~$342.2~~$365.9 million at ~~March 31,~~June 30, 2009, from $297.2 million at September 30, 2008, and ~~$315.7~~$342.2 million at ~~December~~March 31, ~~2008.~~2009. The increase for the ~~six-month~~nine-month period ended June 30, 2009 of ~~$45.0~~$68.7 million was primarily a result of core deposit growth (which includes all deposits excluding CDs) from the Company’s ~~Walmart supercenter in-store~~new branch locations combined with CD growth. ~~$35.2~~$55.8 million of the deposit growth came from the Company’s ~~Walmart supercenter~~new branch locations; of that, ~~$25.0~~$37.8 million was core deposit growth. For the three-month period ended June 30, 2009, the Company had core deposit growth of $27.6 million.

Borrowed Funds. FHLB advances ~~decreased~~increased from $110.2 million on September 30, 2008, to ~~$99.2~~$120.8 million on ~~March 31,~~June 30, 2009, as ~~deposit growth provided~~advances funded additional government agency mortgage-backed security investments during the ~~funds to pay off maturing FHLB advances.~~2009 third fiscal quarter.

~~Shareholders’~~Stockholders’ Equity. Total equity was ~~$62.2~~$55.8 million at ~~March 31,~~June 30, 2009, versus $68.5 million at September 30, 2008. The decrease was ~~due~~mainly attributed to the ~~buyback~~net loss for the nine months ended September 30, 2009, of ~~shares under Citizens’ previously announced share repurchase program (since September 2007, the Company has repurchased 1.6~~$3.7 million, ~~of its common shares); dividends paid; and an~~ increase ~~in the~~of unrealized loss of ~~investment~~mortgage-backed securities ~~available for sale~~tax effected of ~~$2.2~~$3.6 million, ~~net~~and common stock repurchased of ~~tax, related to the revaluation of the Company’s MBS portfolio. The Company does not believe there is any other-than-temporary impairment of these securities at March 31, 2009.~~$5.2 million.

~~Asset~~Loan Quality. The Company’s non-performing assets were ~~$4.8~~$5.0 million at ~~March 31,~~June 30, 2009, or ~~0.94~~0.91 percent of total assets. This was up from $3.3 million, or 0.68 percent of total assets, at September 30, 2008, and ~~$4.4~~$4.8 million, or ~~0.91~~0.94 percent, at ~~December~~March 31, ~~2008.~~2009. The increases since September 30, 2008, and ~~December~~March 31, ~~2008,~~2009 were due to increases in non-performing one- to four-family residential loans, as well as new non-real estate consumer loans moving into the non-performing category.

The Company anticipates minimal losses associated with its non-performing one- to four-family residential loans as supported by recent appraisals of the properties. While ~~Citizens anticipates~~we anticipate some higher loss levels associated with ~~its~~ non-performing consumer loans, loss levels are anticipated to be below comparable peers due to the Company’s strong underwriting criteria. The Company believes its allowance for loan loss is adequate to cover these anticipated losses on its portfolio.

Net charge-offs for the three months ended June 30, 2009, were $164,000, versus $156,000 at March 31, 2009, ~~were $156,000, versus $132,000 at December 31, 2008,~~ and ~~$111,000~~$122,000 for the three months ended ~~March 31,~~June 30, 2008. The annualized net charge-offs to average loans receivable was 0.16 percent for the three months ended ~~March 31,~~June 30, 2009, compared to ~~0.14~~0.16 percent for the ~~December~~March period, and ~~0.13~~0.14 percent for the three months ended ~~March 31,~~June 30, 2008.

Net charge-offs for the ~~six~~nine months ended ~~March 31,~~June 30, 2009, were ~~$288,000,~~$453,000, versus ~~$219,000~~$341,000 for the ~~six~~nine months ended ~~March 31,~~June 30, 2008. The annualized net charge-offs to average loans receivable was 0.15 percent for the ~~six~~nine months ended ~~March 31,~~June 30, 2009, compared to 0.13 percent for the ~~six~~nine months ended ~~March 31,~~June 30, 2008. The Company’s net charge-offs, while up slightly from year-earlier levels, remain at levels ~~considerably~~ below comparable peer ~~company~~bank norms.

Liquidity and Asset / Liability Management. The Company must maintain an adequate liquidity position in order to respond to the short-term demand for funds caused by withdrawals from deposit accounts, increased loan demand and extensions of credit, and for payment of operating expenses. Maintaining this position of adequate liquidity is accomplished through the management of a combination of liquid assets, those which can be converted into cash, and access to additional sources of funds. Primarily, liquid assets of the Company are cash and cash equivalents, other interest-bearing deposits and maturing loans. Advances from the FHLB system represent the Company’s primary source of immediate additional liquidity, and are maintained at a level necessary to fulfill needs. Assets and liabilities are maintained to provide the proper balance between liquidity, safety and profitability. This monitoring process is done on a continuing basis. The Company manages its interest rate sensitive assets and liabilities on a regular basis to lessen the impact of interest rate changes. As part of managing liquidity, the Company monitors its maturing deposits and loans, loan-to-deposit ratio, competitors’ rates and the cost of borrowing funds versus the ability to attract deposits. The Company manages its rate sensitivity position to avoid wide swings in margins and to minimize risk.

Off-Balance Sheet Liabilities. The Company has financial instruments with off-balance sheet risk. These instruments include unused commitments for credit cards, lines of credit, overdraft protection and home equity lines of credit, as well as commitments to extend credit. As of ~~March 31,~~June 30, 2009, the Company had ~~$8.6~~$9.5 million in unused commitments, compared to $7.6 million in unused commitments as of September 30, 2008.

Capital Resources. ~~Capital~~On June 25, 2009, the Bank received written guidance from the OTS further explaining the requirements for risk weighting certain investments, including the Bank’s MBS investments. As a result of the guidance, the Bank re-analyzed its risk weighting methodology for these MBS investments. The OTS guidance requires the Bank to maintain higher levels of regulatory risk-based capital for the portfolio of certain downgraded MBS holdings because of a greater perceived risk of credit loss on these investments. The formula calls for increasing the Bank risk weighting for these assets to well above the par value held by the Bank in calculating the Bank’s regulatory capital ratios, thereby diluting such ratios. Upon applying the higher level of risk-weighted assets to the Bank’s regulatory capital ratios, the calculated capital ratios applicable to the Bank were as follows as of ~~March 31,~~June 30, 2009 and September 30, ~~2008, were as follows:~~

2008:

Capital Ratios
Actual
For Capital Adequacy
Purposes

To Be Well Capitalized
Under Prompt Corrective
Action Provisions

Amount
Ratio

Amount

Ratio

Amount

Ratio

As of March 31, 2009 (Unaudited)
    Total capital (to risk weighted assets) $47,649,000 14.3% $26,704,000 >= 8.0% $33,381,000 >= 10.0%

    Tier 1 capital (to risk weighted assets) $46,759,000 14.0% $13,352,000 >= 4.0% $20,028,000 >= 6.0%

    Tier 1 capital (to adjusted total assets) $46,759,000 9.3% $20,176,000 >= 4.0% $25,220,000 >= 5.0%

    Tangible capital (to tangible assets) $46,759,000 9.3% $7,566,000 >= 1.5% NA NA

As of September 30, 2008 (Audited)
    Total capital (to risk weighted assets) $46,591,000 15.3% $24,340,000 >= 8.0% $30,425,000 >= 10.0%

    Tier 1 capital (to risk weighted assets) $45,821,000 15.1% $12,170,000 >= 4.0% $18,255,000 >= 6.0%

    Tier 1 capital (to adjusted total assets) $45,821,000 9.6% $19,023,000 >= 4.0% $23,778,000 >= 5.0%

    Tangible capital (to tangible assets) $45,821,000 9.6% $7,134,000 >= 1.5% NA NA

~~Management~~

Capital Ratios
	Actual					For Capital Adequacy Purposes						To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount			Ratio			Amount			Ratio

As of June 30, 2009 (Unaudited)
Total capital (to risk weighted assets)	$	43,810,000		8.5	%	$	41,106,000	>=		8.0	%	$	51,382,000	>=		10.0	%

Tier 1 capital (to risk weighted assets)	$	42,867,000		8.3	%	$	20,553,000	>=		4.0	%	$	30,829,000	>=		6.0	%

Tier 1 capital (to adjusted total assets)	$	42,867,000		7.9	%	$	21,845,000	>=		4.0	%	$	27,306,000	>=		5.0	%

Tangible capital (to tangible assets)	$	42,867,000		7.9	%	$	8,192,000	>=		1.5	%	NA			NA

As of September 30, 2008 (Audited)
Total capital (to risk weighted assets)	$	46,591,000		15.3	%	$	24,340,000	>=		8.0	%	$	30,425,000	>=		10.0	%

Tier 1 capital (to risk weighted assets)	$	45,821,000		15.1	%	$	12,170,000	>=		4.0	%	$	18,255,000	>=		6.0	%

Tier 1 capital (to adjusted total assets)	$	45,821,000		9.6	%	$	19,023,000	>=		4.0	%	$	23,778,000	>=		5.0	%

Tangible capital (to tangible assets)	$	45,821,000		9.6	%	$	7,134,000	>=		1.5	%	NA			NA

As a result of the Bank’s analysis of the OTS’ new guidance for risk weighting MBS investments, on July 20, 2009 and again on August 19, 2009 the Board of Directors of the Company approved a capital contribution to the Bank in the amount of $1.7 and $5.9 million, respectively in order to restore the risk-based capital ratio to the category of ‘well-capitalized’. Going forward, the Bank intends to maintain capital levels in the well-capitalized category established by regulatory authorities. ~~The~~Nonetheless, external and internal factors and events could arise or occur that might limit or prevent the Bank ~~was categorized as “well capitalized” under~~from maintaining capital levels in the ~~regulatory framework~~well-capitalized category. See Part II, Item 1A of this report for more information regarding the risks facing our business including those that could affect our ability to maintain capital adequacy asratios in the well-capitalized category.

RESULTS OF OPERATIONS

Overview. For the three months ended June 30, 2009, the net loss was $4.1 million compared to the net income of ~~March 31,~~$0.4 million for the three months ended June 30, 2008. For the nine months ended June 30, 2009, ~~and September~~the net loss attributable to common shareholders amounted to $3.7 million compared to the net income of $1.1 million for the nine months ended June 30, 2008.

~~Results~~ The net loss for the June 2009 quarter was comprised of ~~Operations~~the following components:

~~Overview.~~ ~~For~~

●		$555,000 of after-tax core banking income, defined as net interest income plus banking fee and other income minus operating expenses, excluding the one-time FDIC special assessment of $151,000 after tax expense.

●		$194,000 after-tax, additional non cash provisions for loan losses added to allowances for loan losses.

●		$4.3 million of after-tax, non cash other-than-temporary-impairment (OTTI) on $30.6 million book value of private label mortgage backed securities as the delinquency and loss rates in these securities indicate that all principal and interest cannot be returned.

Even though the ~~second~~Company recorded a net loss for the third quarter, the total assets increased for both the third quarter and first ~~six months~~nine-months of fiscal ~~2009, the Company’s total assets increased, its new~~2009. The Walmart Supercenter in-store branches delivered solid deposit and loan ~~growth and~~growth. With the ~~Company was profitable. Year over year, net income declined.~~announced branch expansion now complete, the Company’s Board of Directors implemented earnings improvement initiatives to help offset the expense of the branch growth. These actions are expected to have bottom line impact in future periods. The fiscal 2009 second-quarter and six-month decreases resulted mainly from two factors. First, the Company increased its 2009 second-quarter provision for loan losses by $178,000 to $374,000 from the fiscal 2009 period. For the six months, the Bank’s loan loss provision rose by $280,000 to $641,000, versus the fiscal 2008 six months. Both increases were dueplanned earnings initiatives include freezing contributions to the ~~current economic environment. The second factor was planned salaries and~~Employee Stock Option Plan, as well as freezing benefits ~~occupancy and other expenses associated with~~under the ~~Company’s continued growth, primarily the openings of Company’s Walmart supercenter branches.~~Supplemental Executive Retirement Plan. These actions are projected to reduce employee benefit expense by approximately $400,000 on an annual basis.

Consistent with the fiscal 2009 first and second quarter, ~~Citizens~~the Bank saw a continuing trend of one- to four-family residential real-estate appraisals being adversely impacted by the current economic crisis during the ~~second~~third quarter. As a result, new loans being considered for approval, which otherwise met ~~Citizens’~~the Bank’s underwriting criteria, were not approved. Despite this trend, the Company’s overall loan volume is ahead of previous periods, being driven by its new ~~Walmart supercenter~~ locations.

1721

The Company anticipates continued loan and deposit growth going forward. The Company believes the new ~~Walmart retail~~ locations will continue to offer excellent potential for additional core deposit and loan growth, and are consistent with ~~Citizens Community Federal’s~~the Bank’s expansion strategy. ~~Since March 3, 2008,~~Through June 30, 2009, the Company, ~~has~~as part of its previously announced plans, had opened 1315 branch locations ~~and is pleased~~since the beginning of 2008. In July 2009, the Company completed its announced branch openings with the ~~performance~~addition of ~~these locations.~~new branch locations in Oak Park Heights, Minnesota and Plover, Wisconsin.

~~According to the Company, 10 of Citizens’ Walmart branches were opened after July 1, 2008, and before March 31, 2009.~~ As of ~~March 31,~~June 30, 2009, the Company’s ~~Walmart in-store~~new branch locations ~~(comprised of 12 branches at that date)~~ have delivered:

· ●

Total new ~~deposits~~deposit growth since March 3, 2008, of ~~$53.7~~$74.3 million—of this, ~~$36.3~~$49.1 million was core deposits; and

· ●

Total ~~new~~ loan ~~gains~~gain since March 3, 2008, of ~~$30.2~~$49.9 million—of this, ~~$8.4~~$15.0 million ~~consisted~~consists of real estate loans and ~~$21.8~~$37.9 million of consumer loans.

Net Income. ~~For~~The Company’s net income (loss) for the ~~fiscal~~three-month period ended June 30, 2009 ~~second quarter,~~was ($4.1m) compared to $389,000 for the prior year three-month period, a decline of ($4.5m) primarily as a result of a ($4.3m) net of tax benefit OTTI charge to our MBS portfolio. Net income for the nine months ended June 30, 2009 totaled ($3.7m), versus $1.1 million for the prior year nine-month period, a decline of ($4.8m) primarily as a result of the OTTI charge referenced above. Excluding the write-down, the Company would have reported net income of ~~$193,000, versus net income of $246,000~~$210,000 for the three-month period ended June 30, 2009, compared to $389,000 for the prior-year ~~second~~third quarter. ~~Net income~~Excluding the OTTI charge, the Company would have reported $600,000 for the ~~six months ended March 31, 2009, totaled $459,000,~~current nine-month period, versus ~~$701,000~~$1.1 million for the prior year ~~six-month~~nine-month period.

~~As previously mentioned,~~ Excluding the ~~fiscal 2009 second-quarter~~write-down, the third quarter and ~~six-month~~nine-month decreases resulted mainly from ~~two factors. First,~~three major factors: the most significant factor was the substantial increase in the Company’s FDIC deposit insurance premium, in addition to a significant FDIC Special Deposit Insurance assessment. Secondly, as expected with our branch expansions almost complete, our planned expenses associated with the fifteen new branch locations we opened in the past seventeen months continued to negatively impact our net income results. Finally, our loan demand was greater than anticipated and that combined with the area economic downturn necessitated an increase in our provision for loan loss.

Our FDIC deposit insurance premium increased significantly to $379,000 and $494,000, respectively, for the quarter and nine-month period ended June 30, 2009, compared to $45,000 and $127,000, respectively, for the same periods in fiscal 2008. In addition, the Company was assessed an FDIC Special Deposit Insurance Assessment of $252,000 in the third fiscal quarter of 2009.

The Company increased its 2009 ~~second-quarter~~third-quarter provision for loan losses by ~~$178,000~~$142,000 to ~~$374,000 from~~$324,000 for the fiscal 2009 period. For the ~~six months,~~nine-month period ended June 30, 2009, Citizens’ loan loss provision rose by ~~$280,000~~$422,000 to ~~$641,000,~~$965,000, versus the same period in fiscal ~~2008 six months.~~2008. Both increases were due to the current economic ~~environment. The second factor was planned salaries~~environment and ~~benefits, occupancy and other expenses associated with the Company’s continued growth, primarily the openings of Citizens’ Walmart supercenter branches.~~increased loan volume.

On a basic and diluted basis, Citizens Community Bancorp, Inc. fiscal ~~second-quarter~~third-quarter earnings (losses) were ~~$0.04~~($0.80) per share for ~~both~~ the current year ~~and~~compared to $0.06 for the prior ~~year.~~year fiscal third quarter. For the ~~six~~nine months ended June 30, 2009, the Company reported basic and diluted earnings (losses) of ~~$0.08~~($0.68) per share versus ~~$0.11~~$0.17 in 2008.

Net interest margin increased from ~~2.95~~2.98 percent to ~~3.19~~3.41 percent for the three-month period ended ~~March 31,~~June 30, 2009, compared to the prior-year three months. ~~For the six months, net~~Net interest margin increased from 2.98 percent in the prior year period to ~~3.11~~3.21 percent for the ~~six-month~~current nine-month period ended ~~March 31, 2009, compared to the prior year six-month period.~~June 30, 2009. Interest spread increased to ~~2.84~~3.12 percent for the 2009 ~~second~~third quarter, compared to ~~2.30~~2.43 percent for the prior-year ~~second~~third quarter. For the ~~six-month~~nine-month period ended June 30, 2009, interest spread increased to ~~2.74~~2.87 percent from ~~2.29~~2.34 percent for the prior year ~~six-month~~nine-month period. The increases in net interest margin and interest spread for both periods were a result of the cost of interest-bearing liabilities falling at a faster pace than the yields on ~~earning~~interest-earning assets.

Maryland		20-5120010
(State or other jurisdiction of incorporation or organization)		~~(IRS~~(IRS Employer Identification Number)

~~Large accelerated filer [ ]~~	~~Accelerated filer [ ]~~	~~Non-Accelerated filer[ ]~~	~~Smaller reporting company [X]~~
		Large accelerated filer [ ] Accelerated filer [ ] Non-Accelerated filer[ ] Smaller reporting company [X] (do not check if a smaller
		~~reporting company)~~

Part I – FINANCIAL INFORMATION
			Page ~~Number~~Number

	Item 1.	Financial Statements (Unaudited)

		Consolidated Balance Sheets as of
		~~March 31,~~ June 30, 2009, and September 30, 2008	3

		Consolidated Statements of Income
		For the Three and ~~Six~~Nine Months ended ~~March 31,~~June 30, 2009, and 2008	4

		Consolidated Statements of Changes in Stockholders’ Equity
		For the Three and ~~Six~~Nine Months ended ~~March 31,~~June 30, 2009, and 2008	5

		Consolidated Statements of Cash ~~Flow~~
		Flows For the ~~Six~~Nine Months ended ~~March 31,~~June 30, 2009, and 2008	6

		Notes to Condensed Consolidated Financial Statements	7

	Item 2.	Management’s Discussion and Analysis of Financial ~~Conditions~~Condition and
		Results of Operation	1014

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	1824

	Item 4.	Controls and Procedures	21
			27

Part II – OTHER INFORMATION			2328

	Item 1.	Legal Proceedings	28
	Item 1A.	Risk Factors	28
	Item 2.	Unregistered Sales of Equity Securities	28
	Item 3.	Defaults Upon Senior Securities	28
	Item 4.	Submission of Matters to a Vote of Security Holders	28
	Item 5.	Other Information	28
	Item 6.	Exhibits	28

SIGNATURES			24


~~EXHIBITS~~			2629

Part I – FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited)	Part I – FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited)			Part I – FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited)
CITIZENS COMMUNITY BANCORP, INC.										Consolidated Balance Sheets
March 31, 2009, unaudited, September 30, 2008, derived from audited financial statements
June 30, 2009, unaudited, September 30, 2008, derived from audited financial statements				June 30, 2009, unaudited, September 30, 2008, derived from audited financial statements
		(in thousands)					(in thousands)
Assets	March 31, 2009		September 30, 2008	June 30, 2009		September 30, 2008
Cash and cash equivalents	$18,685		$23,666	$	23,385		$	23,666
Other interest-bearing deposits	5,297		371		4,312			371
Securities available-for-sale (at fair value)	56,600		61,776		61,384			61,776
Federal Home Loan Bank stock	5,787		5,787		6,040			5,787
Loans receivable	400,472		369,710		426,313			369,710
Allowance for loan losses	(1,544)		(1,192)		(1,703	)		(1,192	)
Loans receivable - net	398,928		368,518		424,610			368,518
Office properties and equipment - net	6,732		5,916		7,568			5,916
Accrued interest receivable	1,904		1,726		2,077			1,726
Intangible assets	1,315		1,481		1,232			1,481
Goodwill	5,593		5,593		5,593			5,593
Other assets	6,673		5,202		10,493			5,202
TOTAL ASSETS	$507,514		$480,036	$	546,694		$	480,036


Liabilities and Stockholders' Equity	March 31, 2009		September 30, 2008	June 30, 2009		September 30, 2008
Liabilities:
Deposits	$342,206		$297,243	$	365,897		$	297,243
Federal Home Loan Bank advances	99,225		110,245		120,805			110,245
Other liabilities	3,902		4,072		4,155			4,072
Total liabilities	445,333		411,560		490,857			411,560

Stockholders' equity:
Common stock - 5,477,475 and 6,226,995 shares, respectively	55		62
Common stock - 5,477,475 and 6,226,995 shares outstanding, respectively					55			62
Additional paid-in capital	56,934		62,192		56,919			62,192
Retained earnings	12,411		12,550		8,005			12,550
Unearned ESOP shares	(3,186)		(3,416)		(3,070	)		(3,416	)
Unearned deferred compensation	(81)		(126)		(59	)		(126	)
Accumulated other comprehensive loss	(3,952)		(2,786)		(6,013	)		(2,786	)
Total stockholders' equity	62,181		68,476		55,837			68,476
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$507,514		$480,036	$	546,694		$	480,036

	Three Months Ended					Nine Months Ended
	June 30, 2009			June 30, 2008		June 30, 2009			June 30, 2008
Interest and Dividend Income:
Interest and fees on loans	$	6,883		$	5,773	$	19,697		$	16,999
Other interest and dividend income		975			1,011		3,010			2,485
Total interest and dividend income		7,858			6,784		22,707			19,484
Interest expense:
Interest on deposits		2,495			2,316		7,649			6,669
Borrowings		1,084			1,273		3,442			3,728
Total interest expense		3,579			3,589		11,091			10,397
Net interest income		4,279			3,195		11,616			9,087
Provision for loan losses		324			182		965			543
Net interest income after provision for loan losses		3,955			3,013		10,651			8,544

Noninterest Income:
Other than temporary impairment
Total impairment losses		(12,502	)		-		(12,502	)		-
Losses recognized in other comprehensive income		5,266			-		5,266			-
Net impairment losses recognized in earnings		(7,236	)		-		(7,236	)		-
Service charges on deposit accounts		336			263		968			755
Insurance commissions		84			80		265			253
Loan fees and service charges		71			71		206			215
Impairment on mortgage-backed securities		(7,236	)		0		(7,236	)		0
Other		3			3		8			9
Total noninterest income (loss)		(6,742	)		417		(5,789	)		1,232

Noninterest expense:
Salaries and related benefits		1,982			1,413		5,533			4,230
Occupancy - net		562			320		1,582			885
Office		372			292		1,128			791
Data processing		96			83		299			271
Amortization of core deposit		84			75		250			226
Advertising, marketing and public relations		52			31		173			96
FDIC insurance premium and special assessment		379			45		494			127
Professional services		201			176		535			439
Other		352			322		955			864
Total noninterest expense		4,080			2,757		10,949			7,929

Income (loss) before provision (benefit) for income tax		(6,867	)		673		(6,087	)		1,847
Provision (benefit) for income taxes		(2,735	)		284		(2,414	)		757

Net income (loss) attributable to common stockholders	$	(4,132	)	$	389	$	(3,673	)	$	1,090

Per share information:
Basic earnings (loss)	$	(0.80	)	$	0.06	$	(0.68	)	$	0.17
Diluted earnings (loss)	$	(0.80	)	$	0.06	$	(0.68	)	$	0.17
Dividends paid	$	0.05		$	0.05	$	0.15		$	0.15

Nine Months Ended June 30, 2009	Shares			Common Stock			Additional Paid-In Capital			Retained Earnings			Unearned ESOP Shares			Unearned Compensation			Accumulated Other Comprehensive Loss			Total
Balance - Beginning of Period		6,226,995		$	62		$	62,192		$	12,550		$	(3,416	)	$	(126	)	$	(2,786	)	$	68,476
Comprehensive loss:
Net (loss) attributable to common shareholders											(3,673	)											(3,673	)
Pension curtailment, net of tax*																				194			194
Amortization of unrecognized prior service costs and net gains/losses, net of tax																				215			215
Net unrealized loss on available for sale securities, net of tax																				(8,339	)		(8,339	)
Change in unrealized losses on securities available for sale for OTTI write-down, net of tax																				4,703			4,703
Total comprehensive loss																							(6,900	)

Common Stock Repurchased		(749,520	)		(7	)		(5,253	)														(5,260	)
Stock option expense								50															50
Committed ESOP shares														346									346
Appreciation (Depreciation) in fair value of ESOP shares charged to expense								(70	)														(70	)
Amortization of restricted stock																	67						67
Cash dividends ($0.15 per share)											(872	)											(872	)
Balance - End of Period		5,477,475		$	55		$	56,919		$	8,005		$	(3,070	)	$	(59	)	$	(6,013	)	$	55,837

*Includes curtailment of $323 ($129, net of tax)
Nine Months Ended June 30, 2008	Shares			Common Stock			Additional Paid-In Capital			Retained Earnings			Unearned ESOP Shares			Unearned Compensation			Accumulated Other Comprehensive Loss			Total
Balance - Beginning of Period		7,118,205		$	71		$	69,934		$	12,420		$	(3,877	)	$	(207	)	$	(192	)	$	78,149
Comprehensive income:
Net income											1,090												1,090
Amortization of unrecognized prior service costs and net gains/losses, net of tax																				41			41
Net unrealized gain on available for sale securities, net of tax																				(940	)		(940	)
Total comprehensive income																							191

Common stock repurchased		(891,210	)		(9	)		(7,846	)														(7,855	)
Stock option expense								54															54
Committed ESOP shares														346									346
Appreciation in fair value of ESOP shares charged to expense								26															26
Cancellation of unvested restricted stock								11									(11	)					0
Amortization of restricted stock																	70						70
Cash dividends ($0.15 per share)											(1,032	)											(1,032	)
Balance - End of Period		6,226,995		$	62		$	62,179		$	12,478		$	(3,531	)	$	(148	)	$	(1,091	)	$	69,949

CITIZENS COMMUNITY BANCORP, INC.
Consolidated Statements of Income - Unaudited
For the Six Months Ended March 31, 2009 and 2008
(in thousands, except per share data)


	Three Months Ended		Six Months Ended

	March 31, 2009	March 31, 2008	March 31, 2009	March 31, 2008
Interest and Dividend Income:
Interest and fees on loans	$6,446	$5,661	$12,814	$11,226
Other interest and dividend income	1,012	777	2,035	1,474
Total interest and dividend income	7,458	6,438	14,849	12,700
Interest expense:
Interest on deposits	2,581	2,263	5,154	4,353
Borrowings	1,120	1,201	2,358	2,455
Total interest expense	3,701	3,464	7,512	6,808
Net interest income	3,757	2,974	7,337	5,892
Provision for loan losses	374	196	641	361
Net interest income after provision for loan losses	3,383	2,778	6,696	5,531

Noninterest Income:
Service charges on deposit accounts	294	221	632	492
Insurance commissions	110	93	181	173
Loan fees and service charges	70	70	135	144
Other	2	3	5	6
Total noninterest income	476	387	953	815

Noninterest expense:
Salaries and related benefits	1,831	1,450	3,551	2,817
Occupancy - net	536	305	1,020	564
Office	364	266	756	499
Data processing	98	89	203	187
Amortization of core deposit	83	76	166	151
Advertising, marketing and public relations	46	35	121	65
Professional services	280	179	449	345
Other	314	338	603	544
Total noninterest expense	3,552	2,738	6,869	5,172

Income before provision for income tax	307	427	780	1,174
Provision for income taxes	114	181	321	473

Net income	$193	$246	$459	$701

Per share information:
Basic earnings	$0.04	$0.04	$0.08	$0.11
Diluted earnings	$0.04	$0.04	$0.08	$0.11
Dividends paid	$0.05	$0.05	$0.10	$0.10

CITIZENS COMMUNITY BANCORP, INC.

Consolidated Statements of Cash Flows - Unaudited
For the Nine Months Ended June 30, 2009 and 2008
	June 30, 2009			June 30, 2008
	(Thousands)			(Thousands)
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net income (loss) attributable to common shareholders	$	(3,673	)	$	1,090
Adjustments to reconcile net income to net cash provided
by operating activities:
Net securities (accretion) and amortization	$	(263	)	$	166
Provision for depreciation		683			342
Provision for loan losses		965			543
Impairment on mortgage-backed securities		7,236			0
Amortization of purchase accounting adjustments		(40	)		(52	)
Amortization of core deposit intangible		249			226
Amortization of restricted stock		67			70
Provision for stock options		50			54
Benefit for deferred income taxes		(3,276	)		(678	)
Net Change in loans held for sale		0			(114	)
ESOP contribution expense (benefit) in excess of shares released		(70	)		26
Increase in accrued interest receivable and other assets		(408	)		(253	)
Increase (decrease) in other liabilities		493			(709	)
Total adjustments		5,686			(379	)
Net cash provided by operating activities		2,013			711
Cash flows from investing activities:
Purchase of Federal Home Loan Bank stock		(253	)		(965	)
Purchase securities available for sale		(20,004	)		(31,839	)
Net change in interest-bearing deposits		(3,941	)		0
Proceeds from principal repayments on securities available for sale		7,828			3,939
Net increase in loans		(57,019	)		(33,877	)
Net capital expenditures		(2,333	)		(947	)
Net cash used in investing activities		(75,722	)		(63,689	)
Cash flows from financing activities:
Increase in borrowings		10,560			16,049
Increase in deposits		68,654			61,537
Repurchase shares of common stock		(5,260	)		(7,855	)
Reduction in unallocated shares held by ESOP		346			346
Cash dividends paid		(872	)		(1,032	)
Net cash provided by financing activities		73,428			69,045
Net increase (decrease) in cash and cash equivalents		(281	)		6,067
Cash and cash equivalents at beginning		23,666			6,354
Cash and cash equivalents at end	$	23,385		$	12,421

Supplemental cash flow information:
Cash paid during the year for:
Interest on deposits	$	7,646		$	6,669
Interest on borrowings		3,504			3,697
Income taxes		925			969
Noncash supplemental information: Impairment on mortgage-backed securities	$	7,236		$	0

Consolidated Statements of Changes in Stockholders' Equity - Unaudited For the Six Months ended March 31, 2009 and 2008 (in thousands, except Shares)
Six Months Ended March 31, 2009	Shares	Common Stock	Additional Paid-In Capital	Retained Earnings	Unearned ESOP Shares	Unearned Compensation	Accumulated Other Comprehensive Loss	Total
Balance - Beginning of Period	6,226,995	$62	$62,192	$12,550	($3,416)	($126)	($2,786)	$68,476
Comprehensive income:
Net Income				459				459
Amortization of unrecognized prior service costs and net gains/losses, net of tax							26	26
Net unrealized loss on available for sale securities, net of tax							(1,192)	(1,192)
Total comprehensive income (loss)								(707)

Common Stock Repurchased	(749,520)	(7)	(5,253)					(5,260)
Stock option expense			33					33
Committed ESOP shares					230			230
Appreciation in fair value of ESOP shares charged to expense			(38)					(38)
Amortization of restricted stock						45		45
Cash dividends ($0.10 per share)				(598)				(598)
Balance - End of Period	5,477,475	$55	$56,934	$12,411	($3,186)	($81)	($3,952)	$62,181


Six Months Ended March 31, 2008	Shares	Common Stock	Additional Paid-In Capital	Retained Earnings	Unearned ESOP Shares	Unearned Compensation	Accumulated Other Comprehensive Loss	Total
Balance - Beginning of Period	7,118,205	$71	$69,934	$12,420	($3,877)	($207)	($192)	$78,149
Comprehensive income:
Net income				701				701
Amortization of unrecognized prior service costs and net gains/losses, net of tax							27	27
Net unrealized gain on available for sale securities, net of tax							43	43
Total comprehensive income								771

Common stock repurchased	(355,000)	(3)	(3,296)					(3,299)
Stock option expense			36					36
Committed ESOP shares					231			231
Appreciation in fair value of ESOP shares charged to expense			24					24
Cancellation of unvested restricted stock			17			(17)		0
Amortization of restricted stock						46		46
Cash dividends ($0.10 per share)				(695)				(695)
Balance - End of Period	6,763,205	$68	$66,715	$12,426	($3,646)	($178)	($122)	$75,263

~~Assets/Liabilities Measured at Fair Value~~	~~Quoted Prices in~~ ~~Active Markets for~~ ~~Identical Instruments~~ ~~(Level 1) (000’s)~~	~~Significant Other~~ ~~Observable Inputs~~ ~~(Level 2) (000’s)~~	~~Significant~~ ~~Unobservable Inputs~~ ~~(Level 3) (000’s)~~


~~Securities Available for Sale~~	-	-	~~$ 56,600~~

Assets/Liabilities Measured at Fair Value	Quoted Prices in Active Markets for Identical Instruments (Level 1) (000’s)		Significant Other Observable Inputs (Level 2) (000’s)		Significant Unobservable Inputs (Level 3) (000’s)

Securities Available for Sale		-		20,347	$	41,037

Beginning Balance, October 1, 2008	$	61,233
Other than temporary impairment	$	(7,236	)
Reclassification adjustment for realized loses in other comprehensive income		7,236
Purchases, issuances and settlements	$	(7,361	)
Changes in unrealized losses	$	(12,835	)
Ending Balance, June 30, 2009	$	41,037

	Securities
Beginning balance, October 1, 2008	$	61,776
Change in unrealized loss		(1,834	)
Purchases, issuances and proceeds		(3,342	)
Transfers in and/or out of Level 3		-
Ending balance, March 31, 2009	$	56,600

●
	·	originating shorter-term consumer loans;
●	·	originating prime-based home equity lines of credit;
●	·	managing our deposits to establish stable deposit relationships;
●	·	using FHLB advances to align maturities and ~~repricing~~re-pricing terms;
●	·	attempting to limit the percentage of long-term, fixed-rate loans in our portfolio which do not contain a payable-on-demand clause; and
●	·	originating first mortgage loans, with a clause allowing for payment on demand after a stated period of time.

Change in Interest Rates in Basis Points ("bp") (Rate Shock in Rates) (1)	Net Portfolio Value			Net Portfolio Value as % of Present Value of Assets
	Amount	Change	Change	NPV Ratio	Change
(Dollars in thousands)

+300	bp	$34,477	$(4,034	)	(10	)%	7.00	%	(60)	bp
+200	bp	36,623	(1,888	)	(5	)%	7.36		(25)	bp
+100	bp	37,953	(558	)	(1	)%	7.56		(5)	bp
+50	bp	38,372	(139	)	0	%	7.61		0	bp
0	bp	38,511					7.61			bp
-50	bp	38,594	83		0	%	7.60		(1)	bp
-100	bp	38,409	(102	)	0	%	7.54		(6)	bp

Change in Interest Rates in Basis Points ("bp") (Rate Shock in Rates)(1)	Net Portfolio Value			Net Portfolio Value as % of Present Value of Assets
	Amount	Change	Change	NPV Ratio	Change
(Dollars in thousands)

+300 bp	$24,590	$(6,254)	(20)%	5.30%	(112)bp
+200 bp	27,422	(3,422)	(11)%	5.84	(59)bp
+100 bp	29,587	(1,257)	(4)%	6.22	(20)bp
+50 bp	30,333	(511)	( 2)%	6.35	( 8)bp
0 bp	30,844			6.42
-50 bp	30,846	2	0 %	6.40	(2)bp
-100 bp	30,538	(306)	(1)%	6.32	(10)bp

Change in Interest Rates in Basis Points ("bp") (Rate Shock in Rates)(1)	Net Portfolio Value			Net Portfolio Value as % of Present Value of Assets
	Amount	Change	Change	NPV Ratio	Change
(Dollars in thousands)

+300 bp	$36,348	$(5,585)	(13)%	9.38%	(100) bp
+200 bp	38,685	(3,247)	(8)%	9.83	( 55) bp
+100 bp	40,591	(1,341)	(3)%	10.18	(21) bp
+50 bp	41,339	(593)	(1)%	10.30	(8) bp
0 bp	41,932			10.38
50 bp	42,338	406	1%	10.42	4 bp
-100 bp	42,617	685	2%	10.44	5 bp
-200 bp	42,720	788	2%	10.36	(2) bp

+300	bp	$34,738	$(4,702	)	(12	)%	8.54%	(80)	bp
+200	bp	36,854	(2,576	)	(7	)%	8.94	( 40)	bp
+100	bp	38,469	(972	)	(2	)%	9.21	(13)	bp
+50	bp	39,055	(386	)	(1	)%	9.30	(4)	bp
0	bp	39,441					9.34
50	bp	39,627	187		0.9	%	9.33	0	bp
-100	bp	39,696	255		1	%	9.31	(3)	bp

	Total				Total Number of		Maximum Number
	Number of		Average		Shares Purchased as		of Shares That May
	Shares		Price Paid		Part of Publicly		Yet be Purchased
Period	Purchased		per Share		Announced Plans		Under the Plan
Jan. 1, 2009 through
Jan. 31, 2009		198,807	$	6.98		198,807		274,482
Feb. 1, 2009 through
Feb. 28, 2009		91,758		6.93		91,758		182,724
March 1, 2009 through
March 31, 2009		182,724		6.87		182,724		0
Total		473,289		6.94		473,289		0

	Election of Directors
	FOR	WITHHELD
Brian R Schilling	85.7%	14.3%
David B. Westrate	89.1%	10.9%

	Ratification of Auditors
	FOR	AGAINST	WITHHELD
	94.2%	5.4%	0.04%

31.1		Rule 13a-15(e) Certification of the Company’s President and Chief Executive Officer
31.2
~~31.2~~	Rule 13a-15(e) Certification of the Company’s Chief Financial Officer
32.1
~~32.0~~*	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).

~~Date: May 11, 2009~~	~~By:~~	~~/s/ James G. Cooley~~
		~~James G. Cooley~~
		Date: August 19, 2009 By: /s/ James G. Cooley James G. Cooley President and Chief Executive Officer

~~Date: May 11, 2009~~	~~By:~~	~~/s/ John Zettler~~
		~~John Zettler~~
		~~Chief Financial Officer~~